Bank of England Deputy Governor Ben Broadbent said on Thursday that it was an open question whether interest rates increase further as policymakers weigh the effects of past tightening on the economy.
A narrow majority of the BoE's Monetary Policy Committee, including Broadbent, voted last month to hold interest rates, halting a run of back-to-back increases in borrowing costs since December 2021.
Broadbent said the dissipating shock from the surge in the cost of energy imports should help British inflation return to the BoE's 2% target in two years, adding this was the case "even if interest rates won't rise further - and that's an open question".
Speaking at a European Central Bank conference, Broadbent echoed the BoE's view that there were growing signs that past increases in rates were starting to affect the economy, pointing to a rise in the unemployment rate.
He said the average interest rate on mortgages would presumably rise further in the next couple of years.
But demand in the economy had also been "less weak" than the BoE had expected.
"It may be - and I just don't think it's easy to tell yet - that tighter policy has either (been) slightly weaker than in past or somewhat delayed," Broadbent said.
Broadbent pointed to risks on either side of the BoE's economic outlook.
"There are scenarios in which this embedded inflation has to be responded to further - or equally, one in which actually the weakness in the real economy accelerates," he said.
